Financial Analysis of Apple Inc - Example

Analysis of Apple Inc Analysis of Apple Inc Apple Inc has been termed as the most dynamic organization in the twenty first century.An analysis of the performance of the organization in 2013 will enable the firm to determine its areas of weakness and concentrate on improving them in the next financial year. A justification of how the company may improve its value chain may also help it to improve its quality and gather a larger market share. Apple Inc aims at producing its original products with unique software and hardware that can attract customers. Although this is a well-built strategy, the organization needs to invest in more research to find out the tastes and preferences of customers. This is because increase in customer value may only be obtained if the firm provides them with the goods that they deserve. Researching the customers’ requirements will help the company to increase customer value, expand sales, and earn higher profits in the forthcoming years than in 2013. Apple Inc should also ensure that it employs qualified personnel in all its distribution channels so that they can deliver goods to customers in the right manner. This is because employees are the main spokespersons of the organization, and it means that even if the goods produced are based on customers’ requirements, poor communication will lead to loss of value. Return on investment = net profit/investment * 100 Year Return on investment 2013 37,037/207,000* 100 = 17.89% 2012 41,733/176,064* 100 = 23.70% The return on investment of the company decreased from 23.7% in 2012 to 17.89% in 2013. This indicates that the organization did not reap as high benefits in 2013 as in 2012. It also means that the company needs to audit its investments to check those that are not highly profitable and find ways of improving them in 2014 (Bloomsbury, 2014). Return on assets = net income/average total assets Year Average assets Return on assets 2013 207,000/2 = 103,500 37,037/103,500*100 = 35.78% 2012 176,064/2 = 88,032 41,733/88,032*100 = 47.41% The return on assets of the organization also declined just like the ROI from 47.41% in 2012 to 35.78% in 2013. The management of the firm needs to evaluate its assets and eliminate the obsolete ones (Crosson, & Belverd, 2011). The firm may formulate techniques of improving the efficiency of the profitable assets. Net income percentage = net income/ revenue * 100 Year Percentage net income 2013 37,037/170,910*100 = 21.67% 2012 41,733/156,508*100 = 26.67% The net income of the company declined from 26.67% to 21.67% between 2012 and 2013. This explains the reason for the decline in the return on assets and return on investment of the organization (Crosson, & Belverd, 2011). Gross margin = sales revenue-cost of goods sold Year Gross margin 2013 $170,910- $106,606 = $64,304/170,910*100 = 37.62% 2012 $156,508 - $87,846 = $ 68,662/156,508*100 = 43.87% The gross margin of the firm also reduced from 2012 to 2013. This means that the efficiency of the manufacturing and distribution departments declined. The firm needs to correct the inefficiencies in these divisions to avoid a declining trend in 2014. Contribution margin = net sales - total variable expenses Year Contribution margin 2013 $170,910 - $ 15,305 = $155,605:170,910 0.91:1 2012 $156,508 - $ 13,421 = $ 143,087:156,508 0.91:1 The firm maintained a contribution margin of 0.91:1 in both years meaning that the organization managed to cover its fixed costs and contribute to profit (Baker, & Filberk, 2013). This also indicates that the firm is able to control its costs, and this also means that the management should concentrate on improving efficiency in all departments. Apple Inc uses Joint Operating Command Systems because the products of the company have access to the internet through application produced by other firms. The organization has synchronized applications such as emails, music, photos, and documents into the devices that it produces. Therefore, the synchronizations indicate that Apple uses JOCS. References Baker, H. K., & Filbeck, G. (2013). Alternative investments: Instruments, performance, benchmarks, and strategies. Hoboken: Wiley and Sons. Crosson, V., & Belverd E., (2011). Needles. Managerial Accounting. Mason: South-Western Cengage Learning. Bloomsbury. (2013). Good Small Business Guide 2013: How to start and grow your own business. London: Bloomsbury Publishing. Read More